Burberry’s second largest shareholder, fund manager Nick Train, has revealed he was in contact with the luxury retailer’s board before the ousting of chief executive Jonathan Akeroyd this week following a disastrous three-month slump in trading.

In a monthly update released on Monday when Burberry (BRBY) issued a profit warning, axed its dividend and appointed Joshua Shulman as Akeroyd’s replacement, Train said: ‘We continue to engage with executives and the board at what is an important juncture for the business.’

Commenting on Burberry’s double-digit share price decline in the second quarter, Train agreed with Shulman’s assessment that the group was ‘an extraordinary luxury brand, quintessentially British, equal parts heritage and innovation’.

However, Train said it ‘is clear he and his fellow executives need to rethink how to fulfil the brand’s potential’ after Burberry reported store sales had plunged 21% in the 13 weeks to 29 June, the first quarter of its financial year.

The decline was in all Burberry’s regions with sales in Asia Pacific and Americas both falling 23% and by 16% in Europe, Middle East and Africa.

Chair Gerry Murphy said the luxury market was proving ‘more challenging’ than expected and warned if current trading levels persisted, Burberry would swing to a first half operating loss.

Burberry shares plunged 16% at the news, knocking 1% off the shares of Train’s £1.5bn Finsbury Growth & Income (FGT ) investment trust which held 4% in the stock at 30 June.

Train also holds Burberry as a top 10 position in the £3.3bn Lindsell Train UK Equity fund he also runs, where it accounts for 4.5% of assets.

Together with the manager’s institutional mandates, Lindsell Train, the boutique he founded in 2000 with Michael Lindsell, owns 6.1%, or £21.9m, of Burberry shares, according to Refinitiv data. BlackRock is the biggest shareholder at 7.2%.  

The company declined to comment on his communication with Burberry or whether Train had pushed for change in management.

Train won’t be alone in being troubled by Burberry’s performance. The company is Citywire A-rated Elite stock held by seven leading global fund managers.

Nevertheless, Burberry’s problems come at a difficult time for Train whose quality growth investment style has focused on long-term stakes in a concentrated pool of brand owners.

For the first 20 years of this century, the strategy proved spectacularly successful, making his funds top performers in their sectors. However, this decade, a combination of Covid, technological change, rising interest rates and market upheavals have seen the approach falter.

Finsbury Growth & Income shares trade 8% below net asset value and rank bottom out of 18 trusts in the UK Equity Income sector, having delivered a total shareholder return of zero over five years with dividends included. The peer group’s average return has been 31.8% with the leader, Law Debenture (LWDB ), having achieved 88.5%.

In the update Train said the second quarter of the year had seen ‘almost everything’ he held in the consumer brand space underperform, with Diageo (DGE) joining Burberry on the losers list.

‘Of course, we have high convictions that investing in luxury and premium brands will provide growth and durability for decades to come – that is why we have built the holdings in such brand owners,’ he said.

June was slightly better with net asset value rising 1% and the shares adding 0.6% against a 1.2% dip in the FTSE All-Share index.  

UK data and software stocks were bright spots with credit scorer Experian (EXPN) and analytics and conference organiser Relx (RELX) gaining 8% in April-June, though the London Stock Exchange (LSEG) and accounting software provider Sage (SGE) struggled after strong runs last year.

A private equity bid approach for Hargreaves Lansdown (HL) helped reverse some of the broker’s steep decline since 2019 and shore up the trust’s returns as it leaped 50% in the quarter to stand at 5.5% of assets at the end of June.

Train said Hargreaves Lansdown is ‘by no means’ the only holding where the market value does not ‘match the strategic value of its business’.

‘We expect that while these valuation gaps persist there will be further bids for portfolio companies or contiguous ones,’ he said.